Ben Bernanke Optimistic That Economy Can Avoid Another Recession

Ben Bernanke Optimistic That Economy Can Avoid Another Recession

Article excerpt

In a speech Friday in Jackson Hole, Wyo., Fed Chairman Ben
Bernanke also said that President Obama and Congress, as well as
officials in Europe, need to step up to ensure economic growth.

Federal Reserve Chairman Ben Bernanke voiced optimism Friday that
the United States can avoid prolonged stagnation, but that outcome,
he said, can't be achieved through Fed policy alone.

Here's a rough translation of what he said in a major speech at a
conference for central bankers in Jackson Hole, Wyo.: The economy
can grow normally again, but President Obama and Congress, as well
as folks in Europe, need to step up to make that happen.

Mr. Bernanke wasn't arguing that the Fed has no further role to
play. The central bank will examine options for monetary policy at a
meeting in September, he said. Yet the Fed, he emphasized, can do
only so much.

While saying the Fed has a "range of tools" that can still be
deployed to nudge the economy in the short run, Bernanke said the
economy now faces a twofold challenge: spurring activity by
consumers and businesses in the near-term, and doing so in a way
that also sets a solid foundation for long-term growth.

"Most of the economic policies that support robust economic
growth in the long run are outside the province of the central
bank," he said.

When the text of Bernanke's speech was released, US stock prices
initially sagged, perhaps because he shied away from any specifics
on possible changes to Fed policy. No hint of "QE3" (a third round
of so-called quantitative easing), other than to say that options
will be discussed.

But soon investors pushed stock prices back up. Various factors
may have been involved - including some unrelated to the Jackson
Hole speech - but some market analysts said traders were cheered by
both Bernanke's cautious optimism and his wake-up call to other
policymakers.

His appeal to politicians in Washington, who have locked horns
recently over taxes and spending, was pointed: "Without significant
policy changes," he said, "the finances of the federal government
will inevitably spiral out of control, risking severe economic and
financial damage. …